Today, in terms of earnings releases for Canadian stocks, it is a very active day with 24 companies in the S&P/TSX composite index scheduled to release their quarterly results. They include: CIBC (CM-T), Loblaw Companies Ltd. (L-T), Gildan Activewear (GIL-T), AltaGas Ltd. (ATA-T), Pembina Pipeline Corp. (PPL-T), Stantec Inc. (STN-T), Crescent Point Energy Corp. (CPG-T), Innergex Renewable Energy Inc. (INE), and Chartwell Retirement Residences (CSH.un-T).
In terms of economic reports, there are no key Canadian economic releases scheduled for today.
In the United States, weekly initial jobless claims and continuing claims data will be announced. Weekly oil inventory data along with natural gas storage numbers will also be released.
This morning, North American stock markets look to open with gains. Commodity prices are higher. The price of oil is currently up over one per cent. The price of gold is up approximately 0.8 per cent and the price of natural gas futures is bouncing back, up over 3 per cent.
Briefly recapping Wednesday's stock market returns, major North American stock markets were mixed.
In the U.S., the Dow Jones Industrial Average increased 0.16 per cent, the S&P 500 index declined 0.11 per cent, and the Nasdaq composite index lost 0.09 per cent.
Turning to Canada, the S&P/TSX composite index fell 92 points, or 0.58 per cent with nine of the 11 sectors closing lower. There were 70 securities in the TSX Index that advanced, 175 securities declined in value, and four stocks closed the day unchanged.
The TSX Index is up 3.55 per cent year-to-date.
On today's TSX Breakouts report, there are 46 stocks on the positive breakouts list (stocks with positive price momentum), and 23 stocks are on the negative breakouts list (stocks with negative price momentum).
It is becoming increasingly challenging finding stocks that have double-digit forecast returns over the next year. For instance, of the 46 stocks on the positive breakouts list, only 9 have double-digit gains forecast and 17 stocks actually have negative returns forecast.
Discussed today is a company that was recently listed on the Toronto Stock Exchange, and the consensus estimate implies a modest double-digit potential gain. However, given the company's strong growth track record, projections may prove to be conservative. The company highlighted today Freshii Inc. (FRII-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Toronto-based Freshii is a fast casual restaurant operator focused on offering healthy menu options such as salads and wraps. The company has locations worldwide but the majority of its restaurants are located in Canada and the U.S.
The company is rapidly expanding its store count. In 2013, the company operated 70 locations. As at Sept. 25, 2016, the company's store count reached 244 restaurants in 15 countries. Management expects the store count to rise to between 430 stores and 440 stores by the end of 2017, and to reach between 810 stores and 840 stores two years later, by the end of 2019.
The company operates a successful franchise model, an asset-light franchise model, meaning that there are low capital investment requirements, which makes operating a Freshii store a financially feasible option for many entrepreneurs. For instance, there are no ovens, grills, fryers, or freezers to invest in. As at September 25, 2016, Freshii's store base was roughly 98 per cent franchised with 240 franchised stores and just four corporate stores.
Management is forecasting solid growth, anticipating annual same-store sales growth of between 3 per cent and 4 per cent for the three-years running between 2017 and 2019. The company has a strong track record. In 2014, same-store sales growth was 8.2 per cent, and in 2015 it was 4.8 per cent.
The stock began trading on the Toronto Stock Exchange on Jan. 31, 2017. The share price has rallied 29 per cent from its initial public offering price of $11.50.
Dividend policy
Management is focused on growth, and as such, the company currently does not pay shareholders a dividend.
Financial forecasts
Financial results are reported in U.S. dollars.
The Street is forecasting revenue of $22-million in 2017, $31-million in 2018 and $41-million the following year. The consensus earnings before interest, taxes, depreciation and amortization (EBITDA) estimates are $10.6-million in 2017, $15.5-million in 2018, and $21.1-million in 2019. Management forecasts achieving EBITDA of between $20-million and $22-million by the end of fiscal 2019. The consensus earnings per share estimates are 21 cents in 2017, rising to 31 cents in 2018, and reaching 43 cents in 2019.
Valuation
The stock is commonly valued by analysts on an enterprise value-to-EBITDA basis. Many analysts justify a premium valuation for the stock given the company's strong growth profile.
The consensus one-year target price is $17, suggesting a potential price return of 15 per cent over the next 12 months. Target prices range from a low of $13.50 (at Jefferies) to a high of $19 (at Baird and National Bank Financial). Individual target prices are as follows in numerical order: $13.50, $15.50, two at $17, $18, and two at $19.
Analysts' recommendations
Seven analysts have issued research reports on the company to-date, six analysts have "buy" recommendations and one analyst has a "hold" recommendation.
The seven firms providing research coverage are as follows in alphabetical order: Baird, Canaccord Genuity, CIBC World Markets, Cowan, Jefferies, National Bank Financial, and RBC Capital Markets.
Chart Watch
Given the stock's limited trading history, technical analysis is not available.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.